The Strait crisis: Where things stand
With the Strait of Hormuz largely closed to normal cargo traffic, independent assessments from agencies including the IEA point to roughly 11 to 11.5 million barrels per day of crude being lost from global markets through March, according to Probal Sen, VP of Equity Research at ICICI Securities. Some supply has been rerouted via the East-West pipeline and Red Sea corridors, but that has not been enough to bridge the gap.
A critical diplomatic deadline now looms — and Iran has made clear it has no intention of relinquishing control of the strait. Escalation fears are growing, with both sides signalling readiness to target civilian infrastructure including desalination plants, which would be a deeply destabilizing step for water supply across the Gulf region.
Backstage, reports suggest a 45-day ceasefire proposal is being discussed as a path to mediation. Whether either party accepts it remains uncertain.
The base case for oil prices
Even in a scenario where the conflict resolves within the next month or so and the strait gradually reopens, prices are unlikely to snap back to pre-conflict levels quickly. Talking to ET Now, Sen explains that the return of lost supply is not a flick-of-a-switch situation. Upstream wells have been shut in, subsea and storage infrastructure has suffered damage, and restarting production safely takes time. Analysts estimate a six-to-eight-week lag before supply meaningfully normalises.
LNG supply constraints are also expected to persist for at least six months regardless of how the strait situation plays out.
The base case for crude is now seen at $80–85 per barrel — well above the $65–70 range that prevailed before hostilities began.
OPEC+ and the discipline question
OPEC+ has recently signalled a gradual unwinding of voluntary production cuts, but there is a practical ceiling to how much this can help near term. Most major OPEC producers in the region still depend on the strait to bring additional barrels to market. Until flows normalize, production quota decisions are almost academic. Once the strait reopens, OPEC discipline will face its real test, as members historically have shown a tendency to prioritize revenue over quotas during price spikes.
What it means for ONGC, Oil India, and OMCs
For upstream players, the earnings math is significant. Sen estimates that every dollar increase in net realization shifts standalone EPS for ONGC and Oil India by roughly 1.3–1.4%. A $30 increment sustained over just two months could add approximately 40% on an annualized basis to earnings relative to previous estimates.
For oil marketing companies (OMCs), the picture is more painful. Every dollar rise in crude, absent a change in retail fuel prices, has a 52–55 paisa per litre impact on retail margins. At current elevated crude levels — up $40–50 from pre-conflict prices — OMCs are absorbing meaningful losses on petrol and diesel sales.
Reliance Industries: The hidden pressures
Reliance Industries is facing its own set of headwinds in the current environment. Despite theoretically stronger gross refining margins from supply tightness, real-world earnings are being squeezed by higher crude procurement costs, elevated freight and insurance expenses, disrupted product yields, and reduced KG Basin gas allocations. The OTC (Oil-to-Chemicals) segment, in particular, is expected to come under continued pressure through the April quarter.
Analysts note, however, that at current prices, the market may be undervaluing Reliance’s non-OTC businesses, with the implied value from its Retail, Jio, and New Energy arms estimated to be well above Rs 1,000 per share on a standalone basis.
The bottom line
For investors and market watchers, the message from energy analysts is consistent: do not expect a quick return to calm. The strait situation, even if it resolves diplomatically, will leave lasting marks on supply chains, infrastructure, and pricing dynamics well into the second half of 2025.